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You need to learn how to manage money wisely if you want to succeed in your debt consolidation program. The fact that you need a debt relief program to deal with your credit issues means you have problems with managing your finances.

This is why you need to be proactive when it comes to dealing with the stress that is brought about by your financial position. The best way to start is to manage money wisely. When you learn how to do this, you can stay on top of your financial situation. Being aware of your current financial circumstances will help you feel in control of everything. The more you feel in control, the less stress you will feel. After all, we usually feel stressed because of uncertainty. If you can be certain about your financial position, you will not feel stressed at all.

How to manage money wisely while consolidating debts

While money stress is usually associated with debt, you do not have to wait for debt freedom to get rid of high anxiety levels. You just have to learn how to manage money wisely. If you improve your financial management skills while in the midst of debt consolidation, you can also find financial security.

To manage your finances while paying off your debts, here are some tips that you need to implement.

Keep your end goal in mind

Your mindset is important as you try to reach a goal. If you want to succeed in completing your debt consolidation program, you have to make sure that you focus on what you are trying to achieve. Sometimes, the goal goes beyond the simple act of paying off debt. There are times when the real reason is to be able to save enough for retirement or have the funds to buy your own house. Whatever the reason is, you need to keep the end goal in your mind because it can lead you to make the right decisions. With this motivation, it will be easier for you to manage money wisely since you want to be one step closer to your goal.

Always consult your budget plan

Another tip that you need to practice to improve your financial management skills is to always consult your budget plan. If you are already in the midst of a debt consolidation program, that means you already have a budget plan in place. Creating one is not enough. You need to follow it strictly. Not only that, but you also have to revisit it every now and then. It is important for you to check if your budget still fits your current financial situation. If not, then you need to make the necessary changes so it will always support your goals.

Practice smart spending

If you are in debt, that means you were not smart with your spending choices. That has to change. As you pay off your debts, you need to make it a habit to spend your money wisely. You have to understand that the amount you earn will not lead you towards financial success. It is the way you manage money wisely that will lead you there. You can start by earning the minimum wage but if you know how to manage it well, you can increase that. Living below your means will give you the extra money to save and invest. That is one way to ensure that your financial future will be safer and stronger.

Make sure your emergency fund is sufficient

Finally, you cannot manage money wisely unless you have enough emergency funds. This is your fall back in case something happens in the future. An emergency fund is important even while you are consolidating debts. Without it, you might be tempted to borrow money again and lose your progress. You need to keep this from happening. You need to save up and have enough emergency fund. This will be difficult while you are paying off your debts. However, you can always start small. As long as your consistent, your small contributions will soon grow. You will be thankful that you have it when the times comes that there is a need for it.

Importance of financial management after debt relief

While it is important to learn how to manage money wisely while paying off debt, you need to keep on doing it even after you have achieved debt freedom. There are several studies that reveal how Americans are really bad are managing their money. They need to improve if they want to make their financial future more secure.

Here are the reasons why it is important to learn proper financial management.

Prolongs the effects of debt freedom

First of all, learning how to manage money wisely will allow you to prolong the effects of debt consolidation. You worked so hard to achieve debt freedom. It was a long journey that was filled with a lot of sacrifices. You need to take advantage of your new found debt freedom to improve your finances. Instead of adding more debt, you should learn how to manage your money so you will not overspend.

Helps you make the right financial choices

Your financial management skills will also influence how you make decisions about it. Managing your money gives you complete control over it. This control gives you the knowledge that you need – like knowing if you can afford something or not. It can also help you decide if you can grab a risky opportunity or let it go. Financial management encourages you to monitor your transactions and that keeps you aware of the status of your personal finances.

Strengthens your financial future

Prolonging the effects of debt freedom and making the right financial choices will slowly lead you towards a stronger financial future. As mentioned, your financial success should not be based on how much you earn. It will be fueled by the way you use your money. If you want a stronger financial future you need to start managing it well right now. That means thinking about your future and making sure that every expense counts. Build a secure future by saving for your retirement. Make your money earn for you by investing it. There are so many ways for you to strengthen your financial security and it all begins with the way you manage your money.

Having an emergency fund is quite useful especially when you are in the midst of a debt relief program. Some people put their savings in the backseat because of their debt payments. While there is nothing wrong with prioritizing your debts, you will benefit from having funds that can specifically get you through unexpected situations.

Reasons why you need an emergency fund during debt relief

If you really want to be successful in your debt relief efforts, you need to save up for an emergency fund. There are three specific reasons why this is important.

It keeps you from borrowing more money

This fund can keep you from adding more to your debt. When you are paying off your debts, chances are you hardly have any extra money left after all your bills are paid. This can be very dangerous because one trip to the emergency room or a busted transmission can force you to borrow money. There are certain situations that you cannot ignore and you need to prioritize. Sometimes, your option is to either borrow money or compromise your debt payments. If you do not want to pay late penalty charges, you will opt to just borrow money so you can pay for the emergency situation. But if you have an emergency fund to begin with, you do not have to worry about adding to your debts or compromising your debt payments.

It makes you feel confident to make bolder choices

Another benefit from having an emergency fund is it will give you a sense of security. We all know how life can bring a lot of uncertainty. One moment you are okay and the next, you are rushing to the hospital to have yourself or a loved one treated. If you have a fund saved up for these events, you do not have to worry about where you will get money.

This security will give you the confidence that you need to make choices about your debts. You can opt to maximize your debt payments to achieve debt freedom faster. You know you do not need the extra cash in case something happens because your emergency fund can cover it.

It lowers your stress level

Finally, having enough savings to finance an emergency will help lower your stress level. Believe or not, even the most simple debt solution, like debt consolidation will do more than just combine your debts under one account. It will help restructure your payments so it will not feel like too much of a burden. Because of that, you will feel less stress in your life. That means your financial situation will not harm your relationships or make things tensed at home. It will also leave you with a clear mind that can make smart decisions about life in general.

Just keep yourself from a future headache and heartache and save some emergency money. Here are some tips that will help you accomplish this feat without affecting your debt payments.

Set an emergency fund target

Start by setting an emergency fund target. How much do you think you need for an emergency? Ideally, it should be around 6 months worth of expenses. If you spend $3,000 a month, you need to save $18,000 in your emergency fund. Obviously, this will be hard to accomplish if you are in the midst of a debt relief program. Find a compromise. Opt for a month’s worth of emergency funds – like $3,000. Focus on that emergency fund target for now.

Start small but be consistent

When you know your saving target, you need to create a plan that will help you reach it. Do not feel discouraged if you can only afford to set aside a small amount. It does not matter. What is more important is that you can do this consistently. Even if it is small, it will eventually grow. If you can only afford to set aside $10 every day, you will end up with $300 a month. In a year, that can grow to become $3,600 a year. Every time you get extra money, add more to your fund. Soon you will find yourself nearing your target emergency fund amount.

Lower your spending temporarily

While you are saving up for this fund, you might want to lower your expenses. Opt to brown bag your lunch for a month to save more money. If you eat out every week, lower that to once a month for now. You might be able to add more savings to reach your target amount faster. Opt to make a few sacrifices for a couple of months until you have enough emergency fund to help sustain your finances as you pay off your debts.

The best way to guarantee debt consolidation success is through proper financial management. It does not matter if you are earning enough to cover your monthly payments. If you do not know how to manage it, you will still be putting your finances in danger.

When you are considered to be good at managing your money, that means you know how to use it properly. You make decisions based on what will improve your finances. You always think ahead to ensure that your financial future will not be compromised. At the same time, you know how to balance your spending so you have enough to enjoy at present.

Being in debt does not mean you are bad at managing your finances. However, if you are having a hard time keeping up with your debt payments, that means you have failed at financial management. Even if you have chosen debt consolidation to deal with your credit situation, that will not be enough if you do not learn to manage your money wisely.

How good financial management guarantees debt relief

There are three ways that it can assist you in guaranteeing debt freedom.

Organizes your finances

Debt is sometimes a result of your failure to organize your finances. When your finances are organized, you become more in control of it. You understand how much comes in each month and how much you spend. That is only possible if your finances are organized.

The easiest way to organize your money is through a budget plan. This plan shows your income and lists the various expenses that you fund each month. Through budgeting, you can easily manage your money and ensure that your debt payments will always be prioritized and funded.

Encourages you to keep an eye on spending

Good financial management can also guarantee debt relief because it encourages you to keep an eye on your spending. Even if you have a budget plan, knowing how much you are spending out of your income is not enough. You need to know where it is actually going. Sometimes, people fall short and end up borrowing money because they failed to pay their priority expenses. After they receive their income, they end up using it on unnecessary expenses. When the due date of their priority expenses come around, they no longer have the money to pay for it.

This is very important when you are in the midst of consolidating your debts. It will help guarantee that you will always have enough funds to pay off your debts.

Aims for financial security

Being in debt will not make you feel financially secure. However, that does not mean you can just leave things as is. If you implement proper financial management in your life, you can make your finances more secure. Every payment made will contribute to the increase in your personal net worth. If you want to pay off your debt faster, you need to manage your money so you can maximize your monthly payments. The faster you pay it off, the closer you get to debt freedom. When that happens, you strengthen your financial security – which will lead to a better future.

These are the three ways that financial management can help ensure that you will really achieve debt freedom. But the best part about this is you will also develop the habits that you can continue using to keep yourself out of debt.

3 financial management habits that will sustain debt freedom

We all know how hard it is to achieve debt freedom. It is not an overnight thing that you can accomplish. It will take time and a lot of self-control to accomplish this feat. But once you have successfully paid off your debts, that is not the end of it. You need to learn how to sustain the newfound debt freedom that you got.

There are many habits that will make you a great manager of your finances. Among all of them, there are three basic habits that you should never forget to implement in your life.

Budgeting

Budgeting is for everyone. It does not matter how much you are earning or if you have debts or not. You will always benefit from using a budget plan. When you religiously use this plan, it is easier for you to stay in control of your finances. You will know the monthly transactions of your money and you can decide on whether you will keep on paying off certain expenses or not. You can also decide if you can increase funding for a certain expense. If you have a new financial goal, your budget plan will help you reorganize your spending to accommodate it.

Smart spending

According to reports, 5 out of 6 Americans have admitted to succumbing to impulsive buying habits. 20% of them even admitted that they spent more than $1,000 on a whim. This is dangerous in so many ways because it can quickly leave you in debt. Even if you use your savings to make the purchase, one emergency can force you to borrow money. If you really want to sustain the debt freedom that you worked so hard to achieve, you have to make sure that you can be smart with your spending.

Take note that smart spending is not just about living within your means. It is making sure that your money is spent on things that will eventually improve your financial situation.

Saving

Finally, saving is an important financial management habit that you need to retain. Life is unpredictable and it can also be costly. If you are not prepared for unexpected expenses, you might end up borrowing money to survive an emergency. Fortunately, more people are more prone to save nowadays. Reports reveal that 59% of people admit enjoying saving more than they do spending. This is a good habit for people to have. If you think that you cannot save more because of your debt payments, do not be fooled. It is possible to do both. Even if your savings are small, it does not matter. It will grow over time. You just have to be consistent in your saving efforts.